Today, Stripe is opening operations in Canada, not a huge step geographically or culturally, but an important first step in achieving a long, ambitious vision: Enabling anyone in any country to easily set up an ecommerce business by allowing them to instantly and easily accept payments.
It’s a hugely important mission for millions of entrepreneurs throughout the world, who have to jump through hoops to set up payment systems and don’t always have the cash and guidance that US entrepreneurs have to help them.
Stripe’s advantage in the US is that it takes on most of the headache in the process, allowing merchants to accept payments instantly while it does the underwriting, not a third party. It aims to do the same thing around the world– amazing for users, an insane headache for Stripe as it navigates each country’s financial laws and regulations. Something so ambitious it may not even be possible.
I have no reason to doubt how serious Stripe is about this mission– the company has always talked about its goals as international, and the team grew up all over the world, from Honduras to Kenya. Unlike a lot of Valley companies, it doesn’t just think “Western Europe” when it says “international.” Today’s announcement is merely the opening volley in game that will take the company decades to play.
That said, while insanely ambitious, the mission is also going to be increasingly competitive and — if Stripe wants to really change the world for businesses outside the US– I’d argue the vision isn’t quite big enough. And, of the three, I think Stripe is the company that could push it even further.
First: Competition. As I wrote several months ago, we’re in a really exciting time when it comes to payments. After more than a decade of basically no innovation, we now have multiple companies gunning very hard after PayPal’s dominance, chipping away at different aspects of the business, whether they directly compete with one another (yet) or not.
The three most exciting are Square, Stripe and Braintree. They all have their inroads that make PayPal nervous (or should): Stripe is a direct threat to the physical in-store market that PayPal has been gunning for hard, Braintree has a lead in mobile commerce and markets against PayPal’s automated fraud detection that can cut off merchant accounts at key moments, and Stripe is just the drop dead easiest way to enable payments instantly. Developers– the group that hates PayPal the most– adore Stripe.
PayPal’s new president David Marcus has acknowledged how ugly things are getting for the payments giant– at least among developers and in the court of public opinion. In an earlier more US-centric era of the Web, these guys would slug it out with PayPal in the US, while the incumbent comfortably owned the international markets. But the global startup ecosystem has become too interconnected, and each of these players are going after international hard. It’s the key focus for Square next year– and Square has a new $200 million round of cash in the bank to go after it.
Aggressive international expansion has been a hallmark of this era of the Web. Sometimes it’s worked well: Seemingly, Uber can turn on new markets at will. Most times it’s been a disaster: Oh, hey, Groupon. And rolling out payment systems around the globe is far more complex than either of these examples.
So while fighting back more nimble upstarts around the world could be a challenge for PayPal, it also could be an advantage. Going international will cost these three time and money and, like Groupon, could ultimately make them weaker. It will take more than perfect execution: It’ll take luck and local champions in each market as well.
But here’s where Stripe is really in an unenviable position– and I single out Stripe because I think co-founder and CEO Patrick Collison has the most international chops of the three and gets this more than the others. If he really wants to help entrepreneurs around the world, he needs to get beyond credit cards.
He’s right that payments are the single biggest bottleneck holding back a wave of Web entrepreneurship, particularly in massive emerging countries like Indonesia, India and much of Africa. But the huge problems is that most of the people in those countries don’t have credit cards at all.
Most people in the West hear that and assume that means these people are all poor. That’s not necessarily the case, and even where it is the case, the volumes can still add up to massive businesses. In aggregate, there are huge amounts of money surging through games and virtual goods, and most of the transactions are happening through cash paid cards in mom-and-pop Internet cafes, or in the best case over mobile.
Tencent became one of largest Internet companies in the world by amassing micro-payments over mobile devices. In Indonesia, I met black-market Zynga credit dealers who make double my salary going from Internet cafe to Internet cafe dealing in cash. Over and over again I’ve met entrepreneurs who want to tap into the growing demand for online goods and services in their countries’ huge growing middle classes, but payments are what is holding them back.
When we talk about the strength of companies like Facebook we tout that one billion people are on it. Where do you think most of those people live? If the great opportunity of the Web today is its gargantuan reach, someone needs to find a way to tie the whole thing together when it comes to payments.
I’m not arguing Stripe should be in, say, Nigeria tomorrow. Clearly, the low hanging fruit for Stripe is countries like Canada and Western Europe and other markets where credit cards are the norm. And by “low hanging fruit” I mean going into those markets will still be incredibly hard. But the way to really change the world is to get beyond credit cards. And the world won’t stand still and wait for long. Already a significant amount of Kenya’s economy flows through M-PESA, and it’s the model every other emerging nation is trying to mimic.
In a time when people in the Valley bitch about a lack of ambition and a lack of true innovation, the payments space is a shining example of people taking on insane challenges to truly change the world and empower small businesses– the engines of the global economy. But if as long as the vision is tied to credit cards, it’ll be restricted to developed (and mostly slow growing) countries.